Making real headway on my 10.25% mortgage

[mjb]

I have an 80/20 mortgage -- the 20% is in a 15-year note at 10.25%, opened in 2006.

I never thought of that mortgage as excessive interest-rate debt, worthy of action -- I considered it part of my regular housing expense. I figured I'd just be making that payment until 2021 as planned. (I have no other consumer debt, but for a lot of reasons I was not saving any money otherwise.)

Soon after discovering MMM in early 2014, I began cutting expenses and attacking this mortgage with all available extra funds. If all goes according to plan, it will be paid off this year and I will start fully funding my retirement accounts.

Seeing the attached graph in Mint was a real confidence-booster!

[SaintM]

What is your primary mortgage term, rate, and balance?

You may be able to refinance and consolidate the two loans at a much lower rate, for the same (or shorter) term as you have remaining now, and end up paying less every month.

[mjb]

What is your primary mortgage term, rate, and balance?

You may be able to refinance and consolidate the two loans at a much lower rate, for the same (or shorter) term as you have remaining now, and end up paying less every month.

Already checked on this -- I can't consolidate the two loans until I have 20% equity + the cash for expenses, which happens to be almost the exact amount I owe on the 10.25% loan.

So I'm gonna re-fi the 80% loan (30yr, 5.375%) now rather than wait, and just kill this sucker.

[Arzosah]

Congratulations!  Once you realise how high a rate that is, it makes basic sense to pay it off as fast as possible - you really went for it, I can see by the dip in the graph!  It looks like its slowed, though, how's it going now?  Can you only pay off so much before you run into penalties?

[Zamboni]

Nice looking graph!  Well done with ramping it up!

I second the idea of looking into a refi.  A couple of years ago I got a 15 year mortgage at under 3% interest.  >10% even on a portion of a mortgage loan is just usurious.

[forummm]

What is your primary mortgage term, rate, and balance?

You may be able to refinance and consolidate the two loans at a much lower rate, for the same (or shorter) term as you have remaining now, and end up paying less every month.

Already checked on this -- I can't consolidate the two loans until I have 20% equity + the cash for expenses, which happens to be almost the exact amount I owe on the 10.25% loan.

So I'm gonna re-fi the 80% loan (30yr, 5.375%) now rather than wait, and just kill this sucker.

Just making sure you checked to see if your house had appreciated in value. If it did, you could refinance both loans now.

Could you get a 0% loan from a credit card? If you only owe $8k, that shouldn't be too hard. They are always sending those offers to me--usually for 15 month terms at 0%. Pay off the 2nd mortgage immediately, refinance immediately, and then put all your cash (which should be much larger now due to the lower interest rates) towards the CC loan to ensure it's gone by the time the rate adjusts.

[Exflyboy]

Yes, stating the obvious but a 20% mortgage is freaking insane!

I think your strategy of refi the large loan makes sense (I heard on the radio that some 30 years mortgages can be got for 3.6%), then using whatever means available to kill the 20% loan.. the interest free credit card makes a lot of sense, as long as you can kill the balance before the interest payments hit.

Good luck!

[SaintM]

Yes, stating the obvious but a 20% mortgage is freaking insane!

I think your strategy of refi the large loan makes sense (I heard on the radio that some 30 years mortgages can be got for 3.6%), then using whatever means available to kill the 20% loan.. the interest free credit card makes a lot of sense, as long as you can kill the balance before the interest payments hit.

Good luck!

I think you misread it.  OP has a 20% LTV 2nd mortgage at 10.25% APR.  Not a 20% APR.

[mjb]

Yes, stating the obvious but a 20% mortgage is freaking insane!

I think your strategy of refi the large loan makes sense (I heard on the radio that some 30 years mortgages can be got for 3.6%), then using whatever means available to kill the 20% loan.. the interest free credit card makes a lot of sense, as long as you can kill the balance before the interest payments hit.

Good luck!

I think you misread it.  OP has a 20% LTV 2nd mortgage at 10.25% APR.  Not a 20% APR.

Yes, exactly. We bought the home with $0 down and did an 80/20 mortgage to avoid paying PMI. This was before 2008, obviously...

Payments slowed down because I work freelance, and so cash flow is erratic. These next few months will have a big windfall of invoices, so I imagine I'll be knocking this out pretty quickly.

The value of the home has not really moved since purchasing it in 2006, so no dice on a total refinance.

Re: doing a 0% credit card offer: I hadn't really considered it, as I was trying to keep my credit report clear of hard inquiries prior to the re-fi, and I've done a lot travel/rewards credit card churning as-is.

It looks like my Barclaycard US Airways (now American Airlines) card is offering me 0% until July 2016, with a 1% fee. I could have that $7k balance paid off @ ~$500/month for 14 months. Even with the extra $89 yearly fee, it's pretty tempting...

[Exflyboy]

Oh yes now I get it..

But yes, using the CC with a 1% fee to pay off a 10% loan sure sounds good.

[Avidconsumer]

Is paying 10.25% pre recession a good mortgage rate to avoid paying PMI? Might it have been better to pay the PMI with a lower mortgage rate? Seems high?

9 years to reach the 20% down payment and still not there? How was renting not a better option?

[My Own Advisor]

Wow, 10.25% mortgage?  That's robbery. 

[forummm]

Re: doing a 0% credit card offer: I hadn't really considered it, as I was trying to keep my credit report clear of hard inquiries prior to the re-fi, and I've done a lot travel/rewards credit card churning as-is.

It looks like my Barclaycard US Airways (now American Airlines) card is offering me 0% until July 2016, with a 1% fee. I could have that $7k balance paid off @ ~$500/month for 14 months. Even with the extra $89 yearly fee, it's pretty tempting...

That sounds cheaper than 10.25% interest. If your credit is really good, opening one new line shouldn't drop you below 740 (the threshold for the best rates). Especially since you would be simultaneously paying off an old line. Even if it does, you're saving money now, and can probably refi along the time you would have without the balance transfer.

[SaintM]

Re: doing a 0% credit card offer: I hadn't really considered it, as I was trying to keep my credit report clear of hard inquiries prior to the re-fi, and I've done a lot travel/rewards credit card churning as-is.

I really have no idea how unfavorably a bank would look at a new credit card.  I imagine holding a revolving balance, even at an introductory 0%, is worse than mortgage of a similar amount.

Could you use an existing one with 0% balance transfer?  Perhaps there would be a 2-3% fee.  Another option would be to sink all your excess cash into the existing second mortgage and have it paid off in months.